Behind Modi’s Warning of Rare Earths “New Colonialism”
Speaking last weekend at a business summit in New Delhi, Indian Prime Minister Narendra Modi cited the threat of a "new model of colonialism.” According to a Reuters report, Modi said the risk was represented by nations that do not regard their custodianship of critical minerals as a "global responsibility” at a time when companies worldwide seek to obtain and secure resources essential to energy-transition objectives.
Quoting Modi:
"We are experiencing this challenge for critical materials, rare earths and others. These things are abundant in some places and not present at all in others, but all of humankind needs them. . . . The ones who have them, if they don't see that as a global responsibility, then this will promote a new model of colonialism. This is my warning."
A recrudescence of colonialism is a baleful specter nearly everywhere, but especially in developing countries of the Global South. Modi chose his words carefully, with full knowledge of their impact beyond those in the audience at the business summit.
Two questions spring readily to mind. First, to whom was he alluding in his reference to those that might fail to meet their global responsibility? Second, why did he choose an oblique reference rather than directly identifying the party in question? The answer to the first question is easy to discern, but the second question, and what is tell us about evolving geopolitics in a world transformed by technology, is more intriguing.
Let’s begin by answering the first question. It’s obvious that Modi was alluding to China.
In a previous post on his site, I called attention to the criticality of rare-earth elements (REEs) and other metals and minerals to the information economy, to the global technology industry, and to cleantech and the green transition. As mentioned in my prior post, China controls about 87% of global rare-earth refining capacity, according to the International Energy Agency, which also forecasts that demand for cobalt, copper, nickel, and REEs could more than double within the next 20 years. In the article that features Modi’s concerns about a revivified colonialism, Reuters estimates that China accounted for 70% of global mine production of rare earths in 2022 and is home to at least 85% of global processing capacity. The article also notes that China earlier this year imposed export restrictions on gallium and germanium, which are used in computer chips and other components, seemingly as a retaliatory measure to U.S. restrictions on chip and chip-making technology sales to China. A lingering concern is that China might enact further reprisals, extending export restrictions to REEs and other minerals.
During the same speech in which Modi voiced his warning, he told the audience of global business executives that India could build and host an efficient and reliable supply chain, unlike the pre-COVID-19 predecessor that "broke down when the world needed it most.” Notwithstanding Modi’s supply-chain ambitions for India, and U.S. willingness to help bring those plans to fruition, a supply chain is only as good as its weakest link. One of the weakest links now involves a steady and reliable supply of REEs and related minerals.
Rare Earths Meet BRICS
That leads us to why Modi’s admonition against China was indirect rather than explicit. Within days of his speech in New Delhi, Modi represented India at the 2023 BRICS Summit in Johannesburg, South Africa. Heading into the annual summit (the 15th), BRICS membership included the five states that give it its name: Brazil, Russia, India, China, and South Africa. At the conclusion of this year’s summit, however, South African President Cyril Ramaphosa announced that Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates had been invited to join the bloc, with their memberships taking effect as of January 1, 2024. The aim of BRICS expansion is to build a multipolar world order as an alternative to what is known as the Western rules-based international order. BRICS believes that its expansion will offer greater influence and economic and political agency to countries of Global South, given them greater say in world affairs.
Considering the timing of Modi’s remarks at the New Delhi business summit, one can readily understand why he refrained from direct confrontation. He wanted to put an onus, and collective pressure, on China by calling out a growing resource-based, supply-chain threat to an audience of global business executives, but he also knew the message would carry to the BRICS membership and others far beyond the walls of the auditorium. He made his plea when BRICS, to which India provides the “I” as a founding member, was announcing an expanded membership and a more ambitious long-term agenda. Indeed, the expanded BRICS membership will allow for more trade in the local currencies of its members, reducing reliance on the US dollar. Several years earlier, BRICS established a development bank, providing an alternative to the International Monetary Fund (IMF) and World Bank for developing nations.
Geopolitical pundits have observed that the additions of Iran, the UAE, Egypt, and Saudi Arabia will give an expanded BRICS a growing share of the world’s energy exports, especially oil, where BRICS stands to constitute 42% of oil supply. The expanded bloc, according to Reuters, will possess 75% of the world’s manganese, 50% of the globe's graphite, 28% of the world’s nickel, and 10% of global copper. That said, China, also a BRICS member, retains its rare-earth dominance all on its own. China needs what other BRICS members possess, especially oil, but BRICS members also need the REEs that China dominates. Many of them will favor trade in currencies other than the U.S. dollar.
A Complicated Club
Studying the membership list of BRICS, now and looking ahead to 2024, one can see that achieving and maintaining common purpose and avoiding internal conflicts will require continuous effort. The relationship between India and China, for example, has been beset by long-running animosities, including chronic border disputes that have occasionally exploded in paroxysms of violence. Meanwhile, despite a recent China-mediated rapprochement, Iran and Saudi Arabia have been regional adversaries for decades. Many current and pending BRICS members, notably India and Brazil, maintain close relationships with the U.S. and other Western countries, while others – China, Iran, and Russia – are, to varying degrees, alienated from the U.S. and the broader Western alliance.
BRICS is a complicated club where harmony will not be easy to maintain. While the expanded membership has common cause in pursuing a viable alternative to the Western rules-based international order, the members will not agree on everything. In fact, the probability of internecine discord is likely to remain an uncomfortable reality.
Modi wanted to put China on notice over REEs and other key minerals and metals, but he had to show restraint given the pending BRICS expansion, which India reportedly resisted initially. Modi’s comments were designed to apply pressure to China within the expanded BRICS, but his gambit will be perceived more as suasion than as a direct attack on another founding member of the group.
India will pressure China within BRICS, on REEs and other matters, but India and China have had their issues and longstanding recriminations before they joined BRICS and they’ll likely continue to have them as they both grow into increasingly powerful members of a club that seems destined for further expansion in the years to come. Still, that Modi resorted to evoking the threat of a new colonialism further demonstrates the importance of REEs and related minerals to the economies and technological strategies of companies and countries worldwide.